Research Report

Investing in Soil Health via Regenerative FarmLand Investment Trusts: A Policy Analysis and Pilot Recommendations

Is it possible to design a new, voluntary private investment vehicle whose focus is on both achieving investor returns and on enhancing soil health?

May 31, 2021

By Molly McGregor, MPP

The soils of the United States are a strategic asset. Healthy soils are essential for the maintenance and
provision of stable and diverse food supply. Healthy soils provide substantial environmental and other
public benefits, ranging from climate change mitigation and resilience, biodiversity, water quality, and many other ecosystem services. As the basis of agricultural production, health soils are the foundation for farmers’ and rural communities’ economic security.

However, agricultural practices that preserve soil health are not being adopted at speed or scale. Status quo, conventional agricultural practices, which rely on tillage, mono-cropping, and synthetic inputs, are unsustainable. The US is losing farmland soil faster than it is being formed, putting at risk food systems, livelihoods, and environmental stability. Farmland stakeholders’ interests are not sufficiently aligned with the conversion from conventional agricultural practices to regenerative agricultural practices. Where available, the current incentives to better align these stakeholders’ interests are inadequate or incomplete to facilitate the rapid adoption of regenerative practices on a national scale.

Given the existing landscape of policy tools and financial incentives, how can private equity financing
facilitate the adoption of regenerative agricultural practices rapidly and at scale? More specifically, is it possible to design a new, voluntary private investment vehicle—a so-called FarmLand Investment Trust (FLIT)—whose focus is on both achieving investor returns and on enhancing soil health? The proposed FLIT model seeks to create market-based incentives that ultimately better align stakeholder incentives to facilitate the widespread adoption of regenerative agricultural practices for healthy soils. Given these objectives, this report seeks to analyze the following research questions:

  1. Which type of measurement, reporting and verification (MRV) framework should be used to
    document and verify regenerative outcomes in a market-based FLIT model?
  2. What structure should the private investment vehicle take (alongside possible government incentives) to best align stakeholder incentives and achieve positive economic and environmental outcomes? Relatedly, how should this structure be piloted?